State Filing

STATE FILING

BEFORE THE ARIZONA CORPORATION COMMISSION

CARL J. KUNASEK, CHAIRMAN
JIM IRVIN, COMMISSIONER
WILLIAM A. MUNDELL, COMMISSIONER

IN THE MATTER OF U S WEST
COMMUNICATIONS, INC.’S COMPLIANCE
WITH § 271 OF THE TELECOMMUNICATIONS
ACT OF 1996

STATEMENT OF POSITION OF
THE TELECOMMUNICATIONS RESELLERS ASSOCIATION
DOCKET NO. T00000A-97-0238

The Telecommunications Resellers Association (“TRA”) , on behalf of its members and
pursuant to the Arizona Corporation Commission’s (“Commission”) July 22, 1999 Procedural
Order in the above-captioned proceeding, submits its Statement of Position regarding U S
WEST Communications, Inc.’s (“U S West”) compliance with Section 271 of the
Telecommunications Act of 1996 (the “Act”).

I. INTRODUCTION
The result of Commission’s investigation into U S West’s compliance with Section 271 of
the Act and its Report to the Federal Communications Commission (“FCC”), will have a
monumental effect on the development of meaningful competition in Arizona’s
telecommunications market, and on the development of local competition in particular.
While TRA welcomes U S West’s entry into the interLATA market, its entry must not be
premature. The Arizona local exchange market must be practically and irreversibly (the
Department of Justice standard) open to competition before U S WEST may be relieved of the
prohibition on its in-region interLATA market entry. Today, Arizona’s local market is
neither practically, and certainly not irreversibly, open to competition as a direct
result of U S WEST’s recalcitrance in meeting its obligations under the Act.

Under the Act, U S WEST is obligated to provide unrestricted access to network elements,
interconnection, and services to Competitive Local Exchange Carriers (“CLECs”) at parity
and on a non-discriminatory basis. “Parity” should mean that CLECs have a right to expect
U S WEST to provide a quality of service that is at least equivalent to that it provides
to its own end users. Such parity and true compliance with the pro-competitive goals of
the Act are particularly crucial to TRA members. TRA members are not global titans that
will survive regardless of the extent that the local marketplace is made accessible to all
competitors. Rather, they are generally smaller, emerging companies that are not just
fighting for market share, but in many cases are fighting for survival. Ultimately, they
will only survive and thrive if they are capable of receiving from U S WEST
interconnection, network elements, and wholesale services on a true parity basis as
required by the Act, in a manner that allows CLECs to reliably serve end-users
(e.g., provision, maintain, bill and provide customer service functions).
Regrettably, Arizona’s CLECs are currently subjected to a myriad of unlawful U S WEST
restrictions, prohibitions, and operational deficiencies that undermine their ability to
compete in, let alone enter, the local market, as the Act intended.

U S WEST inter alia fails to provide CLECs with non-discriminatory access to
Operations Support Systems, fails to provide unrestricted access to unbundled network
elements, and fails to provide unrestricted access to services, issues of most immediate
relevance to TRA’s members. Until U S WEST can affirmatively demonstrate compliance with
the Act’s obligations through the results of independent third party Operations Support
System (“OSS”) testing and in meeting established performance measures over a reasonable
test period, U S WEST’s “compliance” will remain no more than wishful thinking.

II. COMMISSION REVIEW OF U S WEST’S SECTION 271 COMPLIANCE SHOULD BE GUIDED BY THE
SECTION 271 REVIEW STANDARDS ESTABLISHED BY THE FCC.
Reflecting on statutory intent regarding regional Bell operating company (“BOC”) entry
into the interexchange market, the FCC noted in its analysis of BellSouth’s
Telecommunications, Inc.’s second Louisiana application for in-region interLATA market
entry that:

[D]ue to the continued and extensive market dominance of the BOCs in their regions,
Congress chose to maintain certain of the [Modified Final Judgement’s] restrictions on the
BOCs, until the BOCs open their local markets to competition as provided in section 271 of
the Act. One such restriction is incorporated in section 271, which prohibits the BOCs
from entering the in-region, interLATA market immediately. Congress recognized that,
because it would not be in the BOCs' immediate self-interest to open their local markets,
it would be highly unlikely that competition would develop expeditiously in the local
exchange and exchange access markets. Thus, Congress used the promise of long distance
entry as an incentive to prompt the BOCs to open their local markets to competition.
Congress further recognized that, until the BOCs open their local markets, there is an
unacceptable danger that they will use their market power to compete unfairly in the long
distance market. Accordingly, section 271 allows a BOC to enter the in-region, interLATA
market, and thereby offer a comprehensive package of telecommunications services, only
after it demonstrates, among other things, compliance with the interconnection,
unbundling, and resale obligations that are designed to facilitate competition in the
local market [emphasis added].

It had been Congress’ intent that before granting BOC in-region interLATA authority, the
BOC must clearly demonstrate that it fully meets the Section 271 “competitive checklist”
so as to promote the development of local competition. In other words, a BOC can
not simply give the appearance of compliance, but must substantially demonstrate that its
compliance is consistent with Congressional intent to foster the development of meaningful
local competition.

The FCC's Ameritech Order set forth a number of legal standards and principles that have
particular application to U S WEST's compliance with Section 271 of the Act. Among these
were the requirement that a new entrant must have the same access to the BOC OSS that the
BOC and its affiliates enjoy; that an applicant not only prove it is in compliance with
the “competitive checklist” for in-region interLATA market entry at the time of filing its
application, but that it also demonstrate it can be relied upon to remain in compliance;
and that where the FCC is required to make a “predictive judgment,” such as how a RBOC
will perform in the future, the FCC would look to the BOC’s past and present behavior “as
the best indicator of future performance.”

Of particular importance was the requirement that all “competitive checklist”
elements must be satisfied at the time the filing is made. Applicants would not be able to
mitigate deficiencies with a promise of future performance; indeed, the FCC specifically
held that a promise of future performance to address particular concerns would have no
probative value in demonstrating present compliance with the requirements of Section 271.

Similarly the FCC held that the burden of proof is on the BOC for all issues and that
“paper promises” cannot satisfy a BOC's burden of proof. In order to gain entry, a BOC
would be required to support its application with actual evidence demonstrating its
present compliance with the requirements for entry, instead of prospective evidence that
is contingent on future behavior.

Actual parity was repeatedly cited as an indispensable element of a BOC's proof. That an
applicant had been making progress in improving deficient service was inadequate. What
had to be shown was that the applicant was providing interconnection to its competitors
equivalent to the interconnection it provides to itself, regardless of any “improving
situation.”

This Commission's role, under §271(d)(2)(B), is to consult with the FCC “in order to
verify the compliance of the Bell Operating Company with the requirements” of the
competitive checklist. As such, the evidentiary standards expressed in the Ameritech
Order should govern this Commission's review of the record of the technical conference,
and this Commission should make a finding of checklist compliance only if the evidence
submitted by U S WEST complies with the stringent standards set forth in the Ameritech
Order.

III. US WEST HAS NOT MET ITS OBLIGATIONS UNDER SECTION 271 OF THE ACT.
U S WEST does not meet the “competitive checklist” for in-region interLATA market entry,
and has amply demonstrated a lack of commitment or ability to open the local exchange
market to competition. While U S WEST makes many empty assertions that progress toward a
competitive local market has occurred, it has far to go before it can credibly demonstrate
that it has met its statutory obligations to open its local market to competition, and
before it is unleashed to compete in the interLATA market. Nowhere is this more readily
evident than in the day to day experiences of CLECs.

Moreover, U S WEST’s actions belie its claims. Its efforts to seek an abolishment of
Arizona’s LATA boundaries, now under Commission consideration in Docket No. RT-00000J-99-
0095, for example, demonstrate that U S WEST is seemingly more interested in sidesteping
its statutory obligations to open its local markets to competition under Section 271 of
the Act, than it is in working with competitors to provide non-discriminatory access to
interconnection and services. In light of its actions, U S WEST’s claims of meeting its
Section 271 obligations are astounding and preposterous.

A. US WEST DOES NOT PROVIDE NONDISCRIMINATORY ACCESS TO OSS
The ultimate test of U S WEST’s compliance with Section 271 of the Act is rooted in the
ability of its competitors to obtain interconnection, network elements, and services in a
manner which enables them to reliably serve end users rather than undermines their ability
to do so. At the heart of a CLEC’s ability to effectively serve subscribers is CLEC
access to the BOC’s OSS. In its Second Louisiana Decision the FCC stressed that,

… OSS functions used by competing carriers to access BellSouth's systems are analogous to
those functions used by BellSouth itself in its retail operations. BellSouth is thus
obligated to provide competing carriers with access "equivalent to the access [BellSouth]
provides itself." Because BellSouth itself accesses repair and maintenance functions
electronically, it is required to provide competitors with electronic access as well. The
electronic access provided by BellSouth must allow competing carriers to perform repair
and maintenance OSS functions in "substantially the same time and manner" as BellSouth
performs such functions for its own customers.

U S WEST has in no way demonstrated that its OSS provides competing carriers with access
at parity. U S WEST has not demonstrated that CLEC OSS access is fully automated and does
not require manual intervention. U S WEST has not demonstrated that it is capable of
provisioning CLEC orders on time and at parity with U S WEST’s own provisioning of end
user orders. Further, there is no independently verifiable basis for determining that U S
WEST’s OSS are in compliance, in the absence of independent third party OSS testing.

Currently the Commission has only U S WEST’s assurances of compliance. Such assurances
are insufficient for meeting the non-discriminatory and parity standards of the Act, and
unlikely to pass the FCC’s standards for demonstration of compliance. Only through an
exhaustive third party test of U S WEST’s OSS, similar to testing conducted in New York,
and Texas, and currently underway in other states, including Pennsylvania, Georgia,
Louisiana, and California, can there be any certainty of U S WEST’s actual compliance.
Until such independent third party OSS testing is accomplished, U S WEST is otherwise
incapable of demonstrating actual compliance.

B. US WEST DOES NOT PROVIDE NONDISCRIMINATORY ACCESS TO UNBUNDLED NETWORK ELEMENTS
PURSUANT SECTION TO 271(c)(2)(B)(ii)
U S WEST imposes unlawful limitations and restrictions on the unbundled network elements
(“UNE”), in violation of the FCC’s UNE rules, expressly reinstated by the United States
Supreme Court in AT&T Corp. v. Iowa Utilities Board. In affirming the FCC’s rules,
the Supreme Court found that incumbent local exchange carriers must provide UNEs to
competitors in their combined form, and without limitation. To meet its Section 271
obligations, U S WEST must provide all network elements in the FCC’s original Rule
319 list without restriction. The only instance where U S WEST may separate UNE
combinations is upon the request of a CLEC. Any restriction or limitation imposed by U S
WEST or exclusion of certain elements to competitors, is violative of the FCC rules and
can not be deemed in compliance with Section 271 of the Act. US WEST has not demonstrated
that it makes all UNE’s available to competitors in combination or separately, much less
demonstrated that it does not impose unlawful restrictions or limitations on the
availability of UNEs to competitors. U S WEST has also refused to provide CLECs with
Extended Expanded Loops. U S WEST has not demonstrated that its UNE pricing is cost-based.
US WEST cannot be deemed to be in compliance with Section 271(c)(2)(B)(ii).

C. US WEST DOES NOT PROVIDE NONDISCRIMINATORY ACCESS TO RESOLD SERVICES PURSUANT TO
SECTION 271(c)(2)(B)(xiv)
Section 271(c)(2)(B)(xiv) requires the incumbent to make telecommunications services
available for resale pursuant to Sections 251(c)(4) and 252(d)(3) of the Act. Pursuant to
Section 251(c)(4), U S WEST may not impose unreasonable or discriminatory conditions or
limitations on the resale of its retail telecommunications services or otherwise impose
resale prohibitions. The FCC found that before the incumbent attempts to impose resale
restrictions, it must first demonstrate to a state commission that the restriction is
reasonable and nondiscriminatory. The fact that U S WEST may have entered into a limited
number of resale agreements is not prima face evidence that it complies with the
resale provisions of the Act.

U S WEST imposes unreasonable, discriminatory, and unjustified restrictions on the resale
of its services. U S WEST’s opposition to resale of Digital Subscriber Line services
(xDSL) is a prime example. Rather than make xDSL service available for resale, U S WEST
argues that xDSL is not a service subject to the Act’s resale obligations. By attempting
to create a semantic distinction between xDSL and other retail services, U S WEST attempts
to “lawfully” preclude resale of DSL services, contrary to the letter and intent of the
Act.

U S WEST also refuses to make voice mail services available for resale in blatant
disregard to Sections 251(c)(4) of the Act. Voice mail is a desirable service for local
service end users. Its lack of availability in a seamless and cost effective manner will
be a determining factor for many end users in whether to subscribe to a competing carrier.
U S WEST’s refusal to make voice mail services available for resale is but another example
of the company’s failure to meet its resale obligations under the Act.

In light of these and other restrictions and prohibitions, coupled with the dubious
capabilities of its CLEC OSS access, U S WEST has not met its resale obligations pursuant
to Section 271(c)(2)(B)(xiv).

D. US WEST HAS NOT DEMONSTRATED THAT ITS INTERLATA MARKET ENTRY IS IN THE PUBLIC
INTEREST PURSUANT TO SECTION 271(d)(3)(C)
U S WEST relies heavily on statistics to convey a sense that the local market is
effectively competitive, while suggesting that the interexchange market lacks sufficient
meaningful competition as to warrant its entry. U S WEST’s slanted view of local and
interexchange market competition does not constitute sufficient basis for a public
interest determination favoring its interLATA market entry. As argued supra, the
number of competitors that exist in Arizona is not a unilateral indication of actual
competition but merely an indicator of potential competition. One need only look at the
number of access lines being served by U S WEST’s CLEC competitors in relation to those
served by U S WEST to quickly recognize that U S WEST today retains virtually 100 percent
local market share in Arizona. Before considering U S WEST’s arguments regarding the
purported existence of an interexchange carrier oligopoly--an assertion quickly dispelled
by the presence of dozens of active, successful medium and small interexchange providers,
such as many of TRA’s members, currently serving subscribers--one must first consider the
virtual local market monopoly which U S WEST retains. Until the local market is
demonstrably open to competition, there can be no public interest in unleashing a new
competitor who continues to dominate and control local access to it ubiquitous network,
and nearly all access to Arizona end users.

IV. CONSIDERATION OF ACTUAL EXPERIENCE BY CLECS MUST BE A MAJOR FOCUS OF THE
COMMISSION’S INQUIRY.
The crucial point that the Commission must make clear as it undertakes this investigation
is that compliance with the standard established in the Act requires actual,
achieved parity, such that U S WEST allows competitors to provision, maintain,
support and bill their services on a non-discriminatory basis. Citation of statistics of
carriers that have begun the entry process by becoming certificated or entering
interconnection agreements proves nothing but intent. Although such certifications and
interconnection agreements are necessary prerequisites to the competitive local market
that Congress envisioned in the Act, but the fact that a significant number of carriers is
seeking to enter the local market does not equate with an open market in which U S
WEST’s competitors can enter the market and serve end-user customers on a parity basis, as
intended by the Act.

The Commission must distinguish between U S WEST’s promises of future performance and
unsupported assurances of compliance, and U S WEST’s actual performance in allowing
competitors non-discriminatory access. The true determinant here must be the experience
of competitors in areas such as account management, change management, discriminatory
provisioning, maintenance and repair, billing accuracy and billing dispute resolution.
That U S WEST may allege that it has processes to address these matters does not satisfy
the applicable standard – those processes must work in practice.

The Commission must give great weight to the evidence that is developed through this
inquiry regarding the actual experience in the field by competitors trying to provision
their services and to carve out a small piece of the local market. A portion of the
necessary review will be the independent OSS testing, but that will only be one piece. The
Commission should seek to ensure that the serious problems that CLECs are encountering
in provisioning, serving, and billing the end-user customers are fully heard and explored.
Further, because of the importance of achieving processes that will allow non-
discriminatory access at a commercial level and on an ongoing basis, the Commission should
consider and implement a reasonable evaluation period to ensure that U S WEST’s compliance
claims are borne out in actual practice.

The most meaningful input to the Commission’s inquiry concerns the experience of CLECs,
such as TRA’s members, as they have actually worked through US WEST’s processes. CLEC
experiences are in effect a report card on U S WEST's performance in serving wholesale
customers and should serve as a determining factor in the Commission's evaluation of U S
WEST's actual compliance. Only a test of U S WEST’s ability and willingness to effectively
provision services and facilities, over a sustained period of time, can demonstrate that
conditions exist for a successful opening of local exchange markets. In this vein, this
Commission should not approve any U S WEST application until it successfully passes a
three month "road test" proving that it has the expertise, resources, and corporate
commitment to actually provision and maintain the services and facilities needed by its
competitors on a day to day basis. That process would follow the requirement established
by the Texas Public Utilities Commission that Southwestern Bell Telephone Company provide
three months of validated data for all of the relevant performance measurements
before §271 approval could be granted.

As in the case of OSS, any claims by U S WEST with respect to its consistent performance
over this three month period must be verified by an independent third party. Absent a
sustained and verified demonstration of performance and intent, through the type of test
ordered by the Texas Commission, it cannot be concluded that markets in Arizona are open
to competition.

V. CONCLUSION
No matter how seemingly extensive U S WEST’s efforts to date nor how many
potential competitors exist or processes have been implemented to comply with Section 271,
the Commission must focus on U S WEST’s actual performance. The ultimate determination of
U S WEST's compliance with the fourteen point checklist is whether U S WEST's processes
achieve parity and whether services are provided on a truly non-discriminatory basis. Such
compliance can only be ascertained through a thorough evaluation of how U S WEST complies
in under actually everyday conditions with the CLECs.

The Commission should follow the sound approaches used by the Texas commission in
establishing rigorous performance metrics, then evaluate U S WEST's performance not just
for a pseudo-CLEC, but for U S WEST's performance and service to actual CLECs over an
extended period at commercial volumes. To the extent the Commission relies on U S WEST's
own performance data, it must strictly verify that data by: (i) ascertaining the validity
of the data; (ii) considering the input of CLECs as to their actual experience with U S
WEST's performance; and (iii) rigorous third-party testing over some extended time period
to ensure results are reflective of U S WEST's ongoing performance.

TRA urges the Commission to take this opportunity to ensure that U S WEST’s local market
is effectively and irreversibly open to competition in practice and not in promise. Only
at that point does the law allow U S WEST to enter the long distance markets.

Respectfully submitted,

Telecommunications Resellers Association

Andrew O. Isar
Director - State Affairs
4312 92nd Avenue NW
Gig Harbor, WA 98335
Tel: 253.265.3910
Fax: 253.265.3912

August 19, 1999